Amazon.ca raises stakes in same-day delivery service

An Amazon.com employee takes boxes off the conveyor belt at the online retailer’s facility in Fernley, Nev. Amazon.com Inc. is raising the ante in Canada’s e-commerce battle by offering same-day shipping in Toronto and Vancouver just as retailers head into the crucial holiday shopping season.

Amazon.com Inc. is raising the ante in Canada's e-commerce battle by offering same-day shipping in Toronto and Vancouver just as retailers head into the crucial holiday shopping season.

The initiative comes as Amazon.ca has been increasingly adding products, categories and services in the past two years to snare customers, putting pressure on incumbents, such as discount giant Wal-Mart Canada Corp.

"It's all about convenience," Alexandre Gagnon, country manager for Amazon.ca, said in a telephone interview from Seattle on Tuesday. "We know that people who shop online at times may want the items faster."

Story continues below advertisement

But Amazon faces stiff competition. While it is charging fees for same-day delivery, starting at $6.99, Wal-Mart is offering free same-day shipping in the Greater Toronto Area – a service that was launched in September, said Gus Kokonas, head of e-commerce operations. After the holiday season, Wal-Mart will consider making the service permanent, he said.

Same-day shipping is becoming more common among U.S. retailers and malls but is a relatively new phenomenon in Canada. Domestic online shopping operators feel the urgency to catch up to their American counterparts, especially Amazon, to keep customers from fleeing to rivals.

But offering cyber-services, such as same-day delivery or free shipping, can come at a price, one that Amazon.ca's parent has been ready to pay as it operates with losses to build its business. Wal-Mart Canada also is investing heavily in its e-commerce, including free shipping for most orders.

Same-day service will help bolster Amazon.ca's dominance in Canada, predicted Kaan Yigit, president of Solutions Research Group. He said the new service could increase both the amount people buy in each order as well as the frequency of their orders. And Wal-Mart's free same-day service will help it "start gaining on Amazon …" he said

"It's where e-commerce is going in this culture of instant everything and everything last minute," Mr. Yigit said. "Now we can procrastinate until the very last day."

Amazon.ca already enjoys a big lead over major cyber-competitors in Canada, according to research by Peter Sklar, retail analyst at BMO Nesbitt Burns Inc.

Amazon.ca has roughly 5 to 7 per cent share of the Canada's $21.6-billion retail e-commerce market (excluding travel and event tickets), Mr. Sklar estimated. In comparison, Walmart.ca has about a 1.5-per-cent share, Costco.ca 1.6 per cent, BestBuy.ca 1.1 per cent, HomeDepot.ca 0.9 per cent, and Chapters.Indigo.ca 0.2 per cent, he calculated.

Story continues below advertisement

Story continues below advertisement

He predicts Amazon.ca's revenue could triple or quadruple from the current level if it were to achieve the same share of retail sales in Canada as in the U.S. and Britain. In that case, Amazon.ca could "noticeably impact the sales of the incumbent Canadian retailers," Mr. Sklar concluded.

During the 2013 holiday season, Wal-Mart, electronics chain Best Buy Co. Inc. and Indigo Books & Music Inc. were the first major retailers here to roll out same-day shipping in a pilot with Canada Post in the GTA. (Wal-Mart now does it on its own.)

Indigo and Best Buy, which also owns Future Shop, continue to offer same-day delivery for $13.95 (at Indigo) and $9.99 (Best Buy.) But Best Buy's free options, such as next-day delivery in the Toronto area and Vancouver and 20-minute store reserve and pickups, are more popular, said Thierry Hay-Sabourin, vice-president of e-commerce at Best Buy. "It's always difficult when people have to pay for the service. Our consumers go for free options."

Canada Post's research in 2012 found that 10 to 15 per cent of online shoppers would consider using same-day shipping for some items, said Rod Hart, a general manager at the postal service.

But the same-day test showed that, while e-consumers want "cheaper and faster," they "will take cheaper first," Mr. Hart said. "The market is still very much undecided about same-day delivery."

Amazon.ca's same-day delivery costs $6.99 for its Prime members and $11.99 for non-Prime members for the first item and $1.99 per product "for most items," Mr. Gagnon said.

Story continues below advertisement

The service entails customers placing orders by noon and receiving packages before 9 pm the same day, seven days a week. It will offer one million "eligible" items in Toronto and "hundreds of thousands" in Vancouver, including toys, movies, video games, electronics and household necessities.

Tickers mentioned in this story

Data UpdateUnchecking box will stop auto data updates

Comments

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

All comments will be reviewed by one or more moderators before being posted to the site. This should only take a few moments.

Treat others as you wish to be treated

Criticize ideas, not people

Stay on topic

Avoid the use of toxic and offensive language

Flag bad behaviour

Comments that violate our community guidelines will be removed. Commenters who repeatedly violate community guidelines may be suspended, causing them to temporarily lose their ability to engage with comments.

Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.